Taxation: California starts PAYE for employees

Pay As You Earn tax schemes are common - the UK's scheme has been around for decades and works well. Too well, some would say, given the UK Government's propensity to dip into taxpayers' income whenever it suits them.

But in other countries, pay is accumulated, a tax return filed annually along with a cheque for the amount calculated to be due.

Now, California's state taxes are being collected at source out of paypackets.

It does not add to the tax burden - but it does affect cashflow. It also reduces the chance for tax evasion. Lots of people are unhappy.

The rage applied is 10% after structured allowances. Accountants say that a family earning USD100,000 per year with two children will receive, monthly, about USD26 less than at present. That, some say, is a figure that can break household budgets - and at least reduce spending.

But surely the complaints are ill-founded. Taxpayers know that this money is going to have to be paid soon. Prudence says it should be kept in a savings account. Clearly, from the outcry, many people spend their whole salary and then borrow the amount they declare on their tax computation. Say after me: DUH!

But this cash-flow hit comes on top of (very modest) tax rises earlier this year: 0.25 across-the-board income tax increase.

Not so modest were state benefits reductions - some by as much as two thirds.

But not at all modest, state sales tax up 1% to 8.25%, a 16.6% increase. In addition, local districts add their own taxes which can be as much as an additional 2.5%.